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Saturday, October 21, 2006

Are failures really stepping stones to success?

A reader asked me this question: “I have failed in my first startup and worked for another startup and that too failed. I know in my heart that perhaps I can really make it but luck has not smiled on me as yet. How can I regain the confidence to start again? How do I know if I have got the entrepreneurial skills to succeed? When is it time to give up and get a job?”

We hear about the "learning" from failures, should it not really be from successes? Is it because the winners are busy celebrating, that we don't hear their learnings? I went through a lot of introspection before I dared to start again!

I hung on to my startup as my dear life, before I would accept defeat which I would like to believe is out of sheer will power; when I was in the moods of the reader who asked me about daring to start again, I thought I had stayed on out of denial. Maybe it was a combination of both :-)

Now you want to hear the gory details of how we actually changed direction to an enterprise software and hung on as the dot coms crashed around us?

We had boston.com, cio.com, IDG (conference division), mostly publishers as customers and what we saw as a promising list of B level sales pipeline. Our customers payed a monthly fee to use our hosted solution co-branded with their look and feel, based on a tiered pricing based on number of users. Those were the days when web deals were made based on sharing eye-balls between players, saying it increased stickyness and user loyalty.

Before the dot com crash, we faced companies like cityspace, infospace, which were big branded web properties who could not tell us a clear story of their own revenues for us to show justification of how they would earn real money out of our sales by extending their services to mobile users using Coola. Ok, I had a smart team. We realized that the web world had lots of free eyeballs, but no real money. So we decided we would move to the enterprise market as pure software play.

I would be lying if I said that my team just rolled up their sleeve and went to work packaging our server as a software. There was lot of work to do - find the new market, identify who was the customer, rebuild the software product, productize it with sales support documents etc. It sounds a lot like the early days of starting up before the funding.

Yeah, the only difference is that I was a running company of 30 people and that meant real people, their dreams, agendas, fears and inertia to change. Added to that, we were in the middle of our second round funding cycle and bulk of my time was spent visiting VCs and then the dot com crash began - slowly at first. So, we had work like early stages and very less money, but with a running payroll to pay.

The first thing I did was to communicate to my team. We reduced salaries and made a plan to work to build the new software product. I raised a bridge round of $500K and we plugged along. Then the crash deepened around us and VCs started stalling deals.

I decided to focus on my new customers. We looked into the 1 million users we had as consumers of our software and found people from large companies. My current sales VP was great for web companies, but he had not done enterprise sales. Neither had I. But it was my company, so I cold-called and found GE medical as my first customer.

We shipped our first CD to them. Then we got NIH, Albany Medical etc. They setup Coola as a server inside their firewall and loved the idea of sending their mobile workforce out into the field with a palm pilot and a small application that can access their inventory, update their workorders and connect back to their backend systems.

A real business is happy with two things - customers and their money to keep paying bills. We now had a pipeline of positive customers. Still the energy in the team was mixed. We had set out to raise money and customer money was not cash flow. A simple accounting lesson, I learnt the hard way.

I got a VC term sheet for $5mil and that VC began visiting us and ate a lot of our time. I started a bridge round contingent on closing this round and started getting some checks. But as VCs started stalling deals with the dot com crash and with the announcement (we were built upon the Palm economy) that Palm would split as hardware and software company, the VC decided to stall and added more horrendous terms. I decided the VC deal didn't make sense for my team and that we won't close it. I cannot tell who was more scare at that meeting - the VC or me. I called my bridging angels and returned their checks.

I spent 3 months looking for buyers and found dummy deals or honest comments that in the crashing market, nobody was going to announce an aquisition and attract attention to their shares. That was the time to close and exit.

We had a cool office in Woburn, with a ping-pong table for reception and great gizmos and a LED sign tracking the number of Coola users. I decided my first layoffs and called fellow enterprenuer friends who had large office leases and were stuck with them after layoffs. Couple offered to share their space and give us a ready setup for the couple people I would bring. We auctioned our furnitures and ping pong table, and raised whatever money we could and moved in to our new shared office space.

I called my customers and found that their budgets were shrinking for wireless space. I decided to keep Coola alive till my core team could find jobs. Then I would hang in there with the trickling customer monies and scale back when market went up again.If I had a real business, customers would have to pay for it and I was going to put my best fight and try it out. Try I did for a year! I got amazing advice "to declare victory" - lots of dummy deals to sell the company.

Then, at my investors request, I took the hardest path to close the firm - not declaring bankruptcy, but paying all my suppliers and selling all assets and closing my company. I will have to write about the one-year of my survival separately. Its touching to hear your customers cry.

I thought it was one journey, but later realized its the beginning. We all have some passion, we execute any idea that comes our way in certain ways based on our passion built upong our experience base.

Coola was my passion to give mobility to everyone for all kinds of information with a dream to seamlessly integrate a mobile experience with existing systems - web sites, enterprise systems, all making life easy for people on the go. Its cool when people can use the power of the web from a small mobile device, without stopping to think about the technology behind it with clean user experience. Businesses can save a lot of money from the increased productivity of integrating systems and accessing them on the go.

As I started my second startup, I realized I had a core passion to solve problems and a clear execution style, that was my success from my first startup. I believe we were too early for our times, but we faced real customer scenarios we could not have envisioned without executing what we did.

I love building out innovative products and getting them to customers and the energy of building teams to make it happen and thats what I'll keep doing as long as I can find problems I can solve and customers waiting for my marketing to reach them :-)

3 comments:

I met you twice at BU. (I’m the Chinese girl whom you met at Starbucks talking about starting importing fasteners business.) I have following your blog since May, and I really admire your passion and your courage. Thank you for the lessons and tips. Although I’m not nearly as far in the business process as some of the staff you talked about, I learned many lessons for the future.

I have been reading your blog with involvement and interest. I have just entered an entrpreuneral venture in the field of education. I was the head of a mangement institute and I left it (it was really a highly paid job !) to staart an institute to train students in logistics and retail.I am sixty but I have two young persons with me who are also well qualified and as you say full of passion. The pangs of starting and runio gan enterprise in the initial phase is , as you say , is challenging but enjoyable. I enjoyed your writing and have absorbed more confidence and direction. I have really benefitted fro your experieinces.